Oil Prices Might Have Already Hit Bottom for the Year
Analysts at Royal Bank of Canada, Helima Croft and Michael Tran, have stated that oil prices may have reached a low point for the year due to China’s economic re-opening. The analysts anticipate that commodity prices will benefit from this re-opening and believe that the lows seen in the oil market three weeks ago may end up being the lows for the year. Tran stated that China’s reopening is positive for all commodities, including the entire commodity complex.
Croft and Tran expect WTI prices to average around $92 per barrel for the year, with China’s focus on restarting the economy leading to growth for the industrial metals sector. The report states that while commodity investors see the metals trade as the first derivative of the re-opening, individual consumer-linked commodities, such as the oil complex, have lagged the space for now.
However, there is still uncertainty around the return to normal societal behavior and the timeline for this return. The analysts note that the fear of COVID-19 is likely to still be high, leading to a potentially bumpy rebound in consumer behavior. Tran also stated that China’s oil imports do not have to return to full capacity for an oil market rally to occur. He believes that a quarter million, half million, or one million barrels a day over the next few months will cause the oil market to move higher.
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